Individual Assignment: Operations Management Processes in Moleda, a.s.
Introduction
For my assignment I have decided to describe processes in the company Moleda, a.s. It is medium-sized Czech shoe manufacturer. I have decided to divide my work in few parts. In the first part, I will try to define process in terms of operations and introduce and describe five main process types. In the second part, I will describe the company and their products and in the third part, I will try to analyze choices the company made while designing their products and processes and explain why they made them.
Part 1
The Encyclopedia of Operations Management defines process in terms of operations as ‘a set of steps designed to achieve a particular goal.’(Hill, 2012: 270). Choosing the right type and design of process for a certain product is crucial for companies’ success because it allows it to produce better, faster, cheaper and fully exploit its competitive advantage. Designing a process consists of various activities, such as choosing the right location of facilities, their appropriate layout, process planning, capacity planning, ergonomics and work design. These decisions should be made with respect to the product itself, its special characteristics and needs and also in regard to the companies’ options and market situation. So as you can see there is a lot of internal and external factors playing an important role in these trade-offs and that’s why it’s vital for companies to know their options and make the right decisions according to their strategy (Hill, 2012: 272).
Different processes can produce different kinds of products. Some produce huge amounts of products with very little or no variety, others produce low volumes with a very high variety. Volume and variety are two crucial variables in establishing the five primary process types. As we can see from the table, these types are project, jobbing, batch, mass and continuous processes. Many companies use more than one type of process in their operations. For example, on one hand they mass produce their best-selling product, and on the other hand they customize their other products to satisfy individual needs of their customers using batch processes (Slack, 2010: 91).
Picture 1: The Product-Process Matrix
Source 1: Brennan, 2011: 48
Project process is defined by high variety and low volumes. It takes a long time to make and it’s usually used for very unique and customized product. This could be, for example, building of a new Olympic stadium or skyscraper. Process maps for projects are mostly very complex due to its unique nature and a lot of simultaneously occurring activities (Slack, 2010: 92). Most of the new products and services also started as projects in research and development departments.
Second process type is jobbing which is also described by very high variety and low volumes but they differ from project in scale, speed and in the existence of some repetitions. Slack (2012: 92) sees the main difference between these two in the fact that ‘whereas in project processes each product has resources devoted more or less exclusively to it, in jobbing processes each product has to share the operation’s resources with many others. The resources of the operation will process a series of products but, although all the products will require the same kind of attention, each will differ in its exact needs.’ The most common examples of jobbing include tool and machines manufacturing, maintenance etc.
Batch process is somewhere in the middle regarding volume and variety. With the batch process, there is a wider range of products being produced but in groups of identical items. Hill (2011: 37) says that batch is characterized by ‘a system that can make more than one product or product type, set-ups that are used to change the process to make a different product, and working process inventory between steps in the process due to batch sizes and contention for capacity.’ Batch processes differ from company to company in size and number of batches and are very hard to control and manage because they create a lot of waste. The example of a batch process could be a bottle filling operations, where each batch is a different liquid (Hill, 2011: 37).
The fourth process type is called line or mass. For mass process the volume of production is high, but variety is quite small. Mass production is very repetitive and quite predictable and it’s used for example in automobile plants, beer production and similar assembly lines (Slack, 2010: 93).
The last process is called continuous and it’s quite different from the rest. Hill (2011: 82) defines it as ‘a process that makes only one product with dedicated equipment and never needs to handle changeovers (setups).’ There is none or just a small flexibility and products are created in never ending flow. This process is used mainly for primary resources such as electricity, gas/oil or nuclear power.
Part 2
Company
Moleda, a.s. is a medium-sized Czech company which represents almost half of a century of tradition in shoe production. Their main purpose is to combine tradition with new trends and innovation, modern technologies and solutions. The company is specializing in production of shoes and sneakers of the highest quality approved by many international certificates regarding health, ecology and quality. Main product of company is shoe line called ‘Prestige’, which was first introduced in the year 1984 and which is with minor changes in the design and more significant changes in materials and production process still able to attract customers today.
Picture 2: Original design of Prestige shoe
Source 2: Moleda.cz
Company tries to be innovative and it keeps coming up with new and new designs for Prestige and other lines of products. In 2010 Moleda launched a project called ‘Admit your color!’ where their website visitors could submit their own, colorful designs of Prestige shoes. This started new, exciting business opportunity, shoe making on demand, where customers are able to choose their own color variation of their unique Prestige shoe. This idea showed up to be very successful and in the year 2011 the company produced their 1 000 000th pair of Prestige shoes. Last year they were able to produce 140 000 pairs (Annual Report 2012: 4). Previous few years were so successful that company decided to invest in the new facilities and production line to meet the increasing demand. Recent development of the company is characterized by introducing more and more designs and models.
Product range
In 1980s company started with just a few shoe designs that became very quickly extremely popular. Last few years it tries to expand its product range to attract more customers and in order to stay competitive with other major brands in the industry. They introduce one or two new designs each year which must bring a lot of problems regarding operations. They are currently offering 9 shoe models together in 21 variations mainly for leisure, sport, golf, bike riding and other activities. These products are being produced in higher quantities through the production line where some of parts of the product are still hand made to ensure their high quality. Besides that Moleta, a.s. produces also five designs of Prestige shoes on demand. The customers have opportunity to choose from wide pool of colors used on each of 25 parts of the shoe, which brings almost countless possibilities of outcome and very difficult shoe making process. Regarding these facts we can assume that it is indeed a jobbing process or very low volume batch with very high customization.
Picture 3: Examples of custom made Prestige shoes Source 3: Prestizky.cz
Part 3
When choosing and designing the process, company must first consider the product as an end result which ‘drives many other operational decisions, such as process form (project form, job shop, continuous flow, and so on)’ (Brennan 2011: 44). The company chooses the process on behalf of the product. In early 2002, when Moleda, a.s. acquired shoe-making company Svit, which produced Prestige sneakers for almost 30 years, they had to decide on their strategy. Prestige sneakers were known in former Czechoslovakia as a product resembling previous era, when things were made out of local materials, by local people, with high emphasis on quality, which is now, especially in post communistic countries, very appealing concept. That is the reason why I believe they chose the way of maintaining this image of tradition and quality instead of mass producing and cost-cutting.
The company didn’t decide to outsource their production to Asia to cut costs; instead they decided to strengthen the image of a local brand by staying at their former facilities and employing people from the region. The range of products was very narrow, so in order to appeal to a bigger group of customers, the company decided to introduce few new designs. I assume that decisions like this brought a lot of problems regarding the operations. Production was quite small and a lot of the parts of the product remained hand-made and this is still truth today. That’s why I think these products are being produced with usage of a higher volume batch processes.
Another thing is that the company has to deal with a lot of competition on a very tough market. After the revolution in 1989 influx of cheap Chinese products almost destroyed the Prestige shoes and the brand was struggling ever since. In the last few years Prestige shoes experienced unpredicted turnaround. Their sales are rising and company is starting to make a reasonable profit. In the same time it has to struggle with, completely new phenomenon and that’s counterfeit products. That’s why I think now it’s more important than ever to maintain the quality, they so intensively built over the past few years. I believe it truly is quality of their products that saved the company from bankruptcy and it can save them now too. They have to keep batch production even for the price of higher costs and difficult management of operations. .
Another problem the company had to face was that it wasn’t so popular among younger population. In order to attract their attention they decided start with producing customized shoes on demand. Even if introduction of jobbing process brought a lot of operational difficulties and I’m sure that it requires a lot of capacity and higher cost, I strongly believe that simply introducing more colorful designs would not be enough. It certainly wouldn’t draw as much attention. In my opinion they really did a great job combining the traditional design with new trends and fashion while still maintaining their vintage image.
Due to these changes company was forced to make an investment in capacity and move from their previous facilities to bigger industry park outside of the city. I believe that diversifying their product portfolio by introducing jobbing processes brought just too many difficulties in the production line. If increasing capacity was a good decision or not will show the time but I see it as a good answer to rising demand on companies products.
Conclusion
The company concentrates on building a strong long tradition brand recognizable through their vintage design and very high quality which secures comfort and long usability of their products. The key thing to remember is that the company after the decline in 90s is a very small, with limited resources and it’s extremely hard to win over customers from stronger competition. They products truly have to be unique to survive. That’s why I think introducing on demand production was a smart move. Simultaneously managing jobbing and batch processes is very challenging and difficult. It usually creates a lot of waste regarding time and inventory but from the information I have acquired there has been no or very little problems regarding delays, significantly increased costs or unsatisfied customers, so we could assume that operations managers met the challenge and were successful in designing processes that are suitable for companies production.
References [1] Arthur V. Hill, 2011. The Encyclopedia of Operations Management: A Field Manual and Glossary of Operations Management Terms and Concepts (FT Press Operations Management). 1 Edition. FT Press. [2] Linda Brennan, 2010. The McGraw-Hill 36-Hour Course: Operations Management (McGraw-Hill 36-Hour Courses). 1 Edition. McGraw-Hill. [3] Moleda, a.s., 2012. Annual Report 2012, Moleda, a.s., Prague [4] Moleda.cz. 2014. Moleda.cz. [ONLINE] Available at: http://www.moleda.cz/. [Accessed 27 February 2014]. [5] Prestige – tradiční Česká obuv. 2014. Prestige - tradiční Česká obuv. [ONLINE] Available at: http://www.prestizky.cz/. [Accessed 27 February 2014]. [6] Slack Nigel/ Chambers Stuart/ Johnston R, 2010. Operations Management. 6 Edition. Pearson College Div.
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[ 1 ]. Options for customizations are being constatly updated
[ 2 ]. Except for the investment in new facilities
